Truth and fiction top insurance tips and myths

25/08/2010

The ABI has today published its 2010 tips and myths guide to help consumers make the right choices when taking out insurance. In 2008, a total of £10.7 billion was spent on motor insurance and £8.8 billion on property insurance. It is therefore vital consumers have the best possible information before buying insurance.

Maggie Craig, the ABI's acting Director General, said:

"In the current economic climate, it is even more important people are not under-insured or put off getting vital cover because they don't understand how insurance works. People with questions about their insurance should always talk to their insurer or an insurance broker to make sure they have the right level of cover for their needs."

Top 5 Insurance Tips

1. TOP TIP: Disclosure is key. Whether it's previous medical problems or a recent speeding fine, full and early disclosure avoids any possible problems later. Holding back something that is relevant will be a false economy if it means your claim is later turned down. If in doubt, always tell your insurer.

2. Your home should be insured for its rebuilding cost, not its market value. Your buildings insurance sum insured must reflect the full rebuilding cost of your home, not its market value. The ABI has a rebuilding calculator which can help - http://abi.bcis.co.uk/

3. Home improvements should be reflected in the sum insured. The extra value from improvements such as house extensions, new kitchens, bathrooms should be included when renewing your home insurance as they will increase rebuilding cost and therefore the sum insured.

4. Update contents cover. Always keep a check on the value of contents, especially as a home may now contain several flat screen TVs, laptops and music players. If you get new expensive goods, ring your insurer to add it to your policy.

5. Life insurance is based on your health when you take the policy out, not on any subsequent changes. Unlike annual insurance policies, such as motor and household, life insurance is a long term contract. So as long as you answer all questions honestly and provide full and correct information at the start, your premiums and your cover, should stay the same as you get older, even if you fall ill.

5 Insurance myths

6. MYTH: Your vehicle is worth what you paid for it, not what it costs to replace. FACT: If your car is stolen or damaged beyond repair, the insurer will pay you what it costs to replace it with a similar model today, not what you paid for it, as most vehicles lose value over time.

7. MYTH: If your house suffers subsidence it will become uninsurable FACT: Subsidence (as well as landslip and heave) will usually be covered by buildings insurance. If after a claim you are having problems getting subsidence cover there are some schemes available that can cover properties with a history of subsidence. An insurance broker can help you find these.

8. MYTH: The European Health Insurance Card (EHIC) is a substitute for travel insurance. FACT: While the EHIC entitles you to any necessary state-provided medical treatment it does not provide full NHS coverage whilst abroad or pay for emergency repatriation to the UK. You need travel insurance for these.

9. MYTH: Online insurance comparisons always return the best insurance option. FACT: Make sure that the policy you buy covers you for what you need, don`t choose on price alone and ensure you compare like-for-like. Also remember that not all insurers are on comparison sites and if you have specialist requirements, it may be more suitable to contact insurers directly.

10. MYTH: There is an ‘Act of God' exclusion in insurance policies. FACT: Insurance policies do not contain such an exclusion. The policy will set out what is insured and what the main exclusions are. If loss occurs from an event covered, then the insurer will pay out, in accordance with the policy terms and conditions.